In the ever-evolving landscape of price action trading, a concept has gained significant traction among institutional and retail traders alike: Fair Value Gaps (FVG). At Gate, we believe that understanding market inefficiencies is key to anticipating high-probability setups—and FVGs offer just that.

🔍 What is a Fair Value Gap?

A Fair Value Gap is a price imbalance that occurs when the market moves too quickly in one direction, leaving behind a "gap" in liquidity. This typically happens during high-volatility or news-driven events, where price jumps over levels without sufficient buying or selling.

Technically, an FVG is identified when a candle low (in an upward move) or high (in a downward move) doesn't overlap with the previous or following candle. This creates a three-candle structure:

- Bullish FVG: Candle 1 (bearish), Candle 2 (strong bullish), Candle 3 (bullish or neutral)

- Bearish FVG: Candle 1 (bullish), Candle 2 (strong bearish), Candle 3 (bearish or neutral)

These gaps often act as magnets for price, as the market seeks to rebalance and fill the inefficiency.

🧠 Why are FVGs Important?

FVGs are not just visual anomalies—they represent institutional footprints. When large orders are executed, they often cause rapid price movement, leaving unfilled orders behind. Smart money tends to revisit these areas to complete their positions.

**Key advantages of trading FVGs:**

- High-probability entries: Price often returns to fill the gap before continuing its trend.

- Clear invalidation levels: The edges of the gap provide natural stop-loss zones.

- Works across all timeframes: From 1-minute scalps to daily swing trades.

🧩 Using the "Fair Value Gap [LuxAlgo]" Indicator

To simplify the process of identifying and trading FVGs, we recommend the Fair Value Gap [LuxAlgo] indicator on TradingView. This tool automatically highlights bullish and bearish FVGs, tracks their mitigation, and even provides alerts when gaps are filled.

**Key features:**

- Automatic detection of bullish and bearish FVGs

- Mitigation tracking: See which gaps are filled and which remain open

- Threshold filtering: Focus on significant gaps by adjusting the minimum size

- Dynamic mode: Monitor evolving FVGs in real-time

- Alerts: Receive notifications when price fills a gap

> **💡 No repainting, no delays**
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> One of the most reassuring aspects of this indicator is that it **does not repaint**. Once a fair value gap is printed, it stays on the chart—no disappearing zones, no misleading signals.
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> Even better, the indicator **plots FVGs in real-time**. It uses a three-candle structure and confirms the gap **immediately after the third candle closes**. This means you see valid, actionable gaps as they form—not in hindsight.
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> This makes the LuxAlgo FVG tool a reliable companion for both **live trading** and **backtesting**, giving traders confidence that what they see is truly what the market delivered.

**How to use it:**

1. Add the indicator: Search for "Fair Value Gap [LuxAlgo]" in TradingView's Indicators tab.

2. Adjust parameters:

- Use the "Threshold Percentage" to filter out smaller, less relevant gaps.

- Enable "Mitigation Levels" to track filled gaps.

- Use "Auto Threshold" for adaptive filtering based on volatility.

3. Trading setups:

- Counter-trend: Wait for price to fill a gap and look for reversal signals.

- Trend-following: Enter trades in the direction of the gap as it forms.

⚠️ FVGs Are Not Always Respected

While FVGs offer powerful insight into market inefficiencies, it's important to remember: they are not guaranteed zones of reversal or continuation. Sometimes, price moves through a gap without reacting—especially in trending markets or those influenced by news.

**Why this happens:**

- The gap may have already been mitigated on a lower timeframe

- Strong momentum or macroeconomic catalysts overpower technical zones

- The FVG is too small or lacks confluence with other key levels

**How to handle it:**

- Always combine FVGs with structure, liquidity, and volume

- Use alerts and confirmations (e.g., candlestick patterns or BOS/CHOCH)

- Avoid trading FVGs in isolation—context is crucial

🧠 Best Indicator Combinations with FVGs

To increase the accuracy of FVG-based setups, we recommend combining the LuxAlgo FVG indicator with the following tools:

**1. Market Structure (LuxAlgo Smart Money Concepts)**

Identify breakouts of structure (BOS) or changes of character (CHOCH) near FVGs. Use structure shifts to confirm whether the FVG is likely to hold or fail.

**2. Volume Profile or Session Volume**

Confirm FVGs with low volume nodes or volume gaps. FVGs aligning with volume imbalances are more likely to be respected.

**3. Order Blocks**

Look for FVGs that overlap with bullish or bearish order blocks. This confluence often signals institutional accumulation or distribution.

**4. Relative Strength Index (RSI) or Stochastic**

Use momentum indicators to confirm exhaustion or continuation near FVGs. For example, bullish FVG + oversold RSI = potential long setup.

**5. Liquidity Areas (Equal Highs/Lows, Pivot Points)**

FVGs near liquidity pools are often targeted before a reversal. Combine with sweep setups for sniper entries.

🧭 Multi-Timeframe FVG Alignments

One of the most powerful ways to increase the reliability of Fair Value Gaps is to use multi-timeframe confluence. When FVGs align across different timeframes—say, a 1H FVG inside a 4H FVG zone—it often signals a high-probability reaction area.

**Why it works:**

- Higher timeframe FVGs represent larger institutional imbalances

- Lower timeframe FVGs offer precise entries within these zones

- Alignment confirms multiple layers of market participants are active in the same area

**How to use it:**

- Start with a higher timeframe (e.g., 4H or Daily) and mark key FVGs

- Drop to a lower timeframe (e.g., 15M or 1H) and look for fresh FVGs forming inside the higher zone

- Wait for structure shifts or liquidity sweeps within the lower timeframe FVG before entering

This technique is particularly effective when combined with tools like LuxAlgo Smart Money Concepts and Volume Profile, helping you time your entries with sniper-like precision while staying aligned with the broader market narrative.

📊 Test It Yourself

FVGs are best understood through chart time. Load up your favorite pair on TradingView, enable the LuxAlgo FVG indicator, and observe how price reacts. You'll be surprised at how often these zones act as support, resistance, or springboards for major moves.

🚀 Final Thoughts

Fair Value Gaps are more than just a buzzword—they offer insight into how smart money operates. By incorporating FVGs and tools like the LuxAlgo indicator, you gain a deeper understanding of market dynamics and a sharper edge in execution.

At Gate, we're committed to deciphering institutional logic and making it accessible to the retail trader. Stay tuned for more insights, and as always—trade smart, not hard.